Property funds suffered a fifth consecutive year of outflows in 2023, according to the latest fund flow index from Calastone.
Despite September showing a small £2.9m inflow, property funds overall shed £601m in 2023.
This exceeded the £534m outflow in 2022 by a small margin. Both these years were significantly better, however, than each of the previous three.
The similar outflow in 2023 compared to the year before belies a large difference in the total volume of transactions. These fell by 41% year-on-year, largely driven by buyers deserting the sector.
The value of buy orders halved year-on-year to their lowest on Calastone’s record (£714m) while the value of sell orders fell by one third.
Calastone head of global markets Edward Glyn said: “Tighter rules governing redemptions have significantly reduced the strain property funds (previously) experienced from fund outflows. But they have also scared buyers away.
“With more funds closing permanently in 2023, the future is difficult for open-ended property funds.
“For investors keen not to lose access to an important asset class, closed-ended funds offer an alternative with a structure (perhaps) better suited to illiquid buildings, but including them in regular savings plans or in pensions, however, is more complicated for less sophisticated investors.”
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